"This is not a time to be panicking about this. These are viable, strong institutions," Sen. Christopher Dodd, D-Conn., said at a Capitol Hill press conference.

The comments came as the two government-sponsored enterprises continued to be the focus of growing fears they could be insolvent or could face a capital crunch. Shares of Freddie Mac were recently down 10% following strong declines earlier this week, while Fannie Mae shares were down 24%.

"The economics are fine in these institutions and people need to know that," Dodd said. There's no reason "to talk about failure," he added.

Washington policymakers have been huddling in recent days to discuss the fate of the quasi-governmental firms, with the Treasury Department, Federal Reserve and other economic policymakers making public comments in support of the firms.

Treasury Secretary Henry Paulson said earlier Friday that his department is focused on backing the two firms.

"Today our primary focus is supporting Fannie Mae and Freddie Mac in their current form as they carry out their important mission," Paulson said.

Dodd, who chairs the Senate Banking Committee, said he had spoken earlier with representatives from the Federal Reserve, Treasury Department, the executives of Fannie Mae and Freddie Mac, as well as their regulator, the Office of Federal Housing Enterprise Oversight. He said he was reassured that the firms are "fundamentally sound," have access to the capital markets, and have plenty of capital.

"These two institutions are fundamentally, fundamentally strong," Dodd said. "There's no reason for the kind of reaction we're getting."

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